- The crypto market has lost $500 billion since bitcoin hit record highs a week ago.
- Bitcoin was heading for its biggest weekly fall in six months on Friday, having slid by 13%.
- Concern about US crypto taxes and a lukewarm launch of a new ETF has fed into the selling pressure.
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The cryptocurrency market has lost $500 billion since bitcoin hit an all-time high last week, as investors have cashed in on the recent rally that took it to as much as $69,000.
Bitcoin has since fallen 18%, having fallen near $55,000 at one point on Friday. It's lost 13% in the last seven days alone, putting it on course for its biggest weekly slide in six months.
"If the downtrend continues, the 14 day relative strength index will register an oversold reading for the first time since May when BTC fell below $30,000," Will Morris, Sales Trader at UK based digital asset broker GlobalBlock said.
In technical analysis, if the relative strength index, which goes from 0 to 100, falls to 30 or below, this would indicate an asset has been oversold and would, in theory, be due for a bounce.
The Cryptocurrency Market Fear and Greed index – an informal measure of investor sentiment – has dropped to its lowest since early October, and, at 34, signals "fear", Morris said. A reading above around 60 would point to "greed.
"The amount of BTC and ETH on exchanges continues to fall to lower levels and whales continue to accumulate," Morris said in an emailed response.
The VanEck bitcoin strategy exchange traded fund (XBTF) is the third publicly traded bitcoin futures ETF. At its market debut on Tuesday, the fund logged trading volume worth $4.8 million, compared with the roughly $1 billion that ProShares' ETF drew on the day of its launch in late October, according to CoinDesk.
In addition, the new $1 trillion US infrastructure bill, which passed into law on Monday, now requires crypto brokers to report any transactions above a certain level to the tax authorities, but offered little clarity over what constitutes a "broker".
Ethereum's ether token has also lost around 18% since touching a high of almost $4,9000 last Wednesday. It was last trading around $4,162, down around 1.4% on the day, and down nearly 10% on the week, marking its biggest seven-day drop since early September.
With bitcoin under pressure, smaller altcoins have dropped in value too. Dogecoin has lost 11% on the week, while shiba inu has fallen 15%, according to Coinmarketcap. The solana and cardano tokens have also both dropped by around 9.5%.
"Many market participants are taking advantage of the situation and rushing to stock up on cryptocurrencies from the top-10 list on a drawdown, as indicated by various indicators," Johnny Lyu, CEO of cryptocurrency exchange KuCoin, said.
"It is therefore too early to talk about a general market transition into a bearish phase, since institutional investors are maintaining their cryptocurrency portfolio positions," he said.
